Benefit culture fears

PUBLISHED: 16:37 30 April 2008 | UPDATED: 09:42 23 August 2010

THE abolition of the 10p tax rate will fuel a benefit culture and do nothing to encourage people in to work, according to an MP. Adam Holloway, Gravesham Conservative MP, has slammed the new tax measures as cumbersome and claims it may encourage the lo

THE abolition of the 10p tax rate will fuel a 'benefit culture' and do nothing to encourage people in to work, according to an MP.

Adam Holloway, Gravesham Conservative MP, has slammed the new tax measures as cumbersome and claims it may encourage the low-paid to stay on benefits.

He spoke to the Reporter after hearing Parliament's second reading of the Finance Bill, saying it was inefficient and bureaucratic.

It was last Wednesday shortly followed by Prime Minister Gordon Brown performing the first major U-turn of his premiership giving in to backbench demands to compensate the people who will lose out under the new system.

Mr Holloway said: "Do we want to encourage people to work and to earn money with a lower starting rate or do we want them to spend their free time continually fiddling with child tax credit applications and becoming more and more dependent on a benefit culture?"

The abolition of the 10p rate came into effect this month and means that low-earners who would have paid income tax at the lowest 10 per cent rate will now have to pay 20 per cent while the basic rate of income tax has been lowered from 22p to 20p.

Most taxpayers gain from the changes but people earning less than £18,500 a year will lose out.

But Mr Holloway claims that one of the measures, increasing payments to low-paid workers without children by changing the tax credit system, will be of little benefit.

He added: "Some families I have met have variable incomes and have multiple jobs to make ends meet. They certainly do not benefit from a shift from the 10 per cent rate to a need to make tax credit applications, which they must change every time there is a minute adjustment in their employment arrangements.

"One of my constituents told me that a tax credit office adviser had told them to try to have only one job as it would simplify the tax credits situation. That seems pretty crazy.

"Far too many families have suffered through cock-ups with this over money wasting and incompetently run system."

Other measures include asking the low pay commission to examine an increase in wages and using the winter fuel payments system to compensate pensioners under 65.